There are three different ways you can convert, or roll over amounts from a traditional IRA to a Roth IRA:
You can take a distribution from a traditional IRA and roll it over into a Roth IRA within 60 days.
You can have the trustee of your traditional IRA transfer an amount to the trustee of your Roth IRA.
If the same trustee maintains both your traditional IRA and your Roth IRA, you can have the trustee make a transfer.
Recharacterization
A contribution that was originally made to another type of IRA, such as a traditional IRA, can be “recharacterized”, or treated as if it had been made to a Roth IRA. In order to recharacterize a contribution, it must generally be through a trustee-to-trustee transfer. If you recharacterize a contribution, you must:
Include in the transfer any income earned on the original contribution.
Report the recharacterization on your tax return.
Treat the contribution as having been made to your Roth IRA on the date it was actually made to the first IRA.
Failed Conversion
If when you made the conversion, you expected that your modified adjusted gross income for the year would not be over the limit, and that your filing status would not be married filing separately (the lowest limit), but your situation did not turn out as you had expected, you may have what the IRS refers to as a “failed conversion”. This means that:
You will have to pay the 6% excise tax on any excess contribution that is not withdrawn from your Roth IRA,
The distributions from your traditional IRA will have to be included in your gross income, and
The 10% additional tax on early distributions from your traditional IRA may apply.
In order to avoid these consequences, you would have to move the amount you converted, plus any earnings on that amount, back into a traditional IRA before the due date for filing your tax return. In this case, you would not have to include the distribution in your income.